The Plane Truth Behind Boeing’s $18B Score

by Susan J. Aluise | November 15, 2011 7:00 am

After a subdued showing at the Paris Air Show in June, Boeing (NYSE:BA[1]) took the Dubai Air Show by storm on Sunday, inking the largest aircraft deal, with Emirates Airline, in Boeing history. The $18 billion deal includes delivery of 50 extended-range 777-300 jets outfitted with GE Aviation’s (NYSE:GE[2]) GE-90 engines. Boeing expects to deliver the jets to Emirates next March.

While the size of the Emirates order was unexpected, it’s no surprise that the airline chose the 777 — Boeing has sold more than 130 of the twin-engine aircraft so far this year. The Chicago-based defense/aerospace giant is rising on the news — shares were up by more than 2% by midday Monday.

Despite the company’s exposure to the defense market, its commercial aircraft business is a source of strength. So are its fundamentals. At a little over $68, BA is trading about 22% above its 52-week low of $56.01 in August. With a market cap of $50.6 billion, BA has a PEG ratio of 0.95, meaning it could be slightly undervalued. BA has a current dividend yield of 2.5%. Boeing’s one-year return is about 10.5%.

But in the aviation sector, there are no guarantees of a turbulence-free flight. So here are three reasons to hold BA shares and three reasons to fold:

Hold

Fold

As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.

Endnotes:
  1. BA: http://studio-5.financialcontent.com/investplace/quote?Symbol=BA
  2. GE: http://studio-5.financialcontent.com/investplace/quote?Symbol=GE

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